1. On Feb 1 2019, ABC Co. traded in an old piece of equipment that originally cost $64,000 with a salvage value of $4000 and a useful life of 5 years for a new upgraded model that had a cash price of $80,000. The company uses straight-line depreciation and the original equipment was purchased on Feb 1, 2015.
A) Prepare the journal entry to record the exchange under the assumption that a $10,000 trade-in allowance was received and the balance was paid in cash. (B) Prepare the journal entry to record the exchange under the assumption that instead of a $10,000 trade-in allowance, a $15,000 trade-in allowance was received and the balance was paid in cash.
2. XYZ Co. Purchased a delivery van on January 1, 2000 for $80,000. At the time of purchased it was estimated that the van would be used for 8 years with a $20,000 trade-in value. On January 1, 2004 the company decided to revise the useful life to 10 years and revise the residual value to $15,000. Using straight-line depreciation, determine the book value on January 1, 2004 and the revised depreciation for 2004.
3. A, B, and C formed abc Consulting this year by making capital contributions of $250,000, $400,000, and $150,000, respectively. They anticipate annual loss of $200,000 and are considering the following alternative plans of sharing profits and losses:
I. In the ratio of their initial investments; or
II. Salary allowances of $100,000 to A, $90,000 to B, and $50,000 to C and interest allowances of 15% on initial investments, with any remaining balance shared in the ratio of 3:2:1.
1. Use the schedule to show how a loss of $200,000 would be distributed under each of the alternative plans being considered. (Round to the nearest dollar if needed.)
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